4 Things You Can Learn From John Oliver About Retirement Planning

On his HBO show Last Week Tonight, comedian John Oliver recently turned the national spotlight on the wealth management and retirement planning industry. In light of a new Department of Labor rule requiring all financial advisors to act as fiduciaries for retirement accounts, in which we strongly believe, Oliver skewered the opaque tendencies of brokers and traditional financial advisors. He urges viewers to bring their business to a transparent fiduciary who has your best interest at heart.

Oliver’s segment serves an important purpose — many regular people who trust a traditional financial advisor with their money, or millennials who are just now beginning to think about retirement planning, simply don’t know the many ways the advisor could be robbing them of their hard-earned money. While not everyone is as clueless as the woman whom Oliver ridicules for asking CNBC host Suze Orman whether she should spend $4,000 to get an elf-spotting certification in Iceland, the many ways traditional financial advisors hurt their clients are often hidden unless the client does the digging themselves. With that in mind, here are four major takeaways from Oliver’s monologue.

1. Many financial advisors may not have your best interest at heart — but you can find one who does.

As Oliver notes, “financial advisor” is a vague term. Even so, many traditional financial advisors are not fiduciaries, and instead operate on commission. (An advisor who is a fiduciary must always act in the best interests of you, the client.) This means they can execute trades and strategies that line their own pockets with little regard for your financial well-being. We believe that this is unacceptable; as a result, we operate as a fee-only fiduciary that does not receive any sort of commission. While some advisors make money by endorsing a particular investment or product to their clients, we are paid only by our clients.

2. The “active management” of many funds and advisors can destroy your capital.

As we’ve previously detailed in this blog, you shouldn’t expect to win with actively managed funds. Not only do these funds fail to outperform the market, but in doing so they also accrue massive fees due to the large amount of trades they are making. While compound interest grows your investment over time, interest isn’t the only thing that compounds — fees do as well. Oliver cites a study in which an index of stocks, selected by a cat throwing a ball at them, outperformed an actively managed fund overseen by experts. The cat earned returns of 7%, while the pros garnered only 3.5%. Oliver summarizes the situation succinctly: “If you stick around doing nothing while everyone else around you [messes] up, you’re going to win big.” At Sherman Wealth Management, we believe sticking with investments that focus on low cost and tax efficiency is the best way to save for the long term. ETFs are an investment vehicle that we utilize to accomplish this goal.

3. It doesn’t have to be this complicated, and it might be getting simpler.

There are easy steps you can take. Start saving now — it’s never too early. When screening financial advisors, ask if they are fiduciaries. With your money in the hands of a fiduciary who puts your best interest first, you can be confident in your advisor’s motivations.

4. These principles aren’t abstract — they have real consequences for real people, like you.

To demonstrate all of this, Oliver examined the 401k his own employees at HBO were using through their provider. The retirement fund charged 1.69% fees, and their broker refused to offer low-cost, low-fee plans. The advisor even messed up the calculations on the compounding interest, making his original math off by over $10,000,000. These are not the actions of someone who values his/her clients more than a paycheck; on the other hand, we value our partnership in our clients’ future success.

Where Oliver went wrong is when he questioned why anyone would invite their financial advisor to their wedding. We are proof that a relationship like that is possible between client and advisor. As a fiduciary, when we consistently act in the best interests of our clients, we end up building strong friendships with them.

At Sherman Wealth Management, we have long been at the forefront of the fiduciary movement for transparency and conflict-free advice. At a traditional insurance company or wire house, advisors will often recommend expensive funds produced by their institution; on the other hand, we can take a more holistic view of investments to determine which are best for you. We believe in growing with you, not at your expense.

The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.

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